Lords opposes EU contract law harmonisation

10 June 2009

The Lords EU Committee in its report EU Contract Law: the Draft Common Frame of Reference examines the activity recently promoted in the field of contract law by the Commission under its research budget.

Publication of report

The Committee reaffirms its opposition to harmonisation of contract law at an EU level, and doubts the desirability and value of aiming to make available to contracting parties on an optional basis an entirely new European law of contract.

European contract law

The Committee in re-affirming its opposition to any moves to harmonise European contract law concludes that these are for the present off the agenda. In rejecting the alternative of an instrument making available to parties as an option an entirely new European law of contract, the Committee points out that to be effective such a proposal would require legal underpinning at the European legal level.

It doubts the value of investing further resources to achieve what would become a wholly untested legal framework additional to all existing systems. The Committee saw no convincing evidence of any need or demand for such a system.

Draft Common Frame Reference

The Committee’s report acknowledges the academic value of the Draft Common Frame of Reference (DCFR) prepared for the European Commission in the form of a draft code of law relating to contracts and obligations, as well as of the comparative law work underpinning it. The Committee concludes that this work will be "an aid to mutual understanding of the diverse legal systems represented in the European Union".

The Committee considers that the development of a form of "toolbox" to assist European legislators could be useful to improve the quality of European legislation in the area of contract law. But it questions whether the DCFR is in a form which is usable for this purpose and identifies problems regarding its scope, its general philosophy or approach and its terms.

It questions whether reformulation of all or any part of the DCFR into a more formal or "political" Common Frame of Reference should be a priority for the Commission or Council; and it suggests that, if the idea were to be pursued, it would require effective consultation and should involve a close focus on key areas, rather than an attempt to restate in the abstract at the European level the whole of the law of contract.

An EU law reform body

Finally, it suggests that the Government and Commission give further considerations to the idea of an EU law reform body, along the lines of the UK’s law reform commissions, to promote the coherence of European law.

Commenting Lord Mance, Chairman of the Sub-Committee on Law and Institutions which prepared the report, said:

"We are pleased that wholesale harmonisation of European contract law appears to be off the table. We think that the idea of an optional EU law code of contract (or of EU wide standard terms of contract) ought equally to be discounted.

"The DCFR, and the underlying comparative law material which is we understand to be published later this year, represent a hugely impressive academic work, which will be of value as such to both national and European legislators, lawyers and courts across Europe. A better understanding of how contracts work across Europe can only help business and consumers operating in the single market.

"However the DCFR is an academic text of a complete code of contract, and it takes an approach and makes choices which raise concerns and have been subject to some criticisms – particularly as to whether they would be beneficial or usable in a practical sense. We would resist any proposal to give the DCFR a formal European or institutional status, and we question both the feasibility of adapting it or parts of it to suit such a purpose, and also whether the Commission or Council should give any priority to attempting to do this.

"We make some observations about the process of production of the DCFR, and suggest that, for future large-scale projects of law reform, the European Commission might consider establishing an EU law reform body."